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Pinterest: Traffic Trends Show Silver Lining
Stock Analysis & Ideas

Pinterest: Traffic Trends Show Silver Lining

Share prices of Pinterest (PINS) peaked in February this year and have been on a downward slope, with occasional peaks and troughs here and there. However, looking at the past twelve months, stock prices have declined by 32.73%. (See Pinterest stock chart on TipRanks)

Website Traffic Troughing?

September has been a particularly rough month for Pinterest. Shares had dropped 12.4% month-over-month by the end of September. This decline was accompanied by a decline in website traffic, according to TipRanks’ Website Traffic tool, which helps evaluate a company’s website traffic volume from data sourced from Semrush (SEMR).

A few days prior to the Q3 earnings call on November 4, we had discussed that this website traffic decline might indicate a downswing in the Q3 results. Sure enough, in the Q3 earnings call, management mentioned how Gen Z users contributed much less to monthly active user growth due to changes in SEO. That reduced web traffic to its platform, especially in certain emerging international markets.

However, using the same website traffic tool, we noticed a steady improvement in website traffic from September 21 onward, for a month. There was a 4.74% growth in visits from unique users between September 21 and October 21.

Also, we see that there has been a 10.19% increase in unique visits this year so far, as compared to the same period last year.

This gives us a ray of hope that the website traffic could be troughing out. This is important because Pinterest is a social media platform and its business thrives on user traffic.

Possible Reasons Behind PINS Improvement

As economies reopen and people go back to school and work, the time spent on social media is declining. However, this seems to be a passing phase.

The world had undergone a major and sudden change after the onset of the pandemic and is yet to fully recover from it. Management at Pinterest believes that the global economy is not yet back to normal, and therefore, one shouldn’t come to any conclusions about the business when looking at the declining number of users, yet.

In the Q3 earnings call, CEO Benjamin Silbermann said he doesn’t believe that this trend reflects a permanent change in human behavior, and that monthly active users are bound to gradually fall back to their normal seasonal growth pattern.

Experts Weigh In

Earlier this month, Citi analyst Jason Bazinet reiterated a Hold rating on Pinterest, but lowered the price target to $48 from $65. He acknowledged the company’s efforts to further monetize the platform and expand internationally. However, Bazinet thinks that the company’s growth opportunities are “generally priced in at current levels.”

Turning to Wall Street, the analyst consensus has a cautiously optimistic stance towards the company, with a Moderate Buy rating based on 5 Buys and 13 Holds. The average Pinterest price target of $57.19 indicates an upside potential of 32.78%.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.

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